New Delhi, Jun 4 (KNN) The Reserve Bank of India (RBI) has told the Supreme Court (SC) that it cannot waive interest on loans during the lockdown period as it will risk the financial viability of banks.

In an affidavit filed in the apex court, RBI informed that the interest payable on these loans to be Rs 2.01 lakh crore, or equivalent to 1% of India’s gross domestic product.

The RBI made this statement on affidavit in response to a PIL filed by a borrower claiming that since the lockdown is in place, there was no means for citizens to earn a livelihood.

“Imposition of interest (by banks) during the moratorium period is completely devastating and wrong,” the petitioner argued.

The RBI has announced a six-month moratorium on loans repayments from March, giving borrowers the option to postpone EMIs till August, to ease the financial stress on them due to Covid-19 and the lockdown.

 “The RBI does not consider it prudent or appropriate to go for a forced waiver of interest, risking the financial viability of the banks it is mandated to regulate, and putting the interests of the depositors in jeopardy,” said the apex banking body.

On Wednesday, the banking regulator told the court that the moratorium was only a deferral and not a waiver on payments.

It only defers collection of loans and interest till a further point of time, which is not later than March 31, 2021, it said.

''It is essential that the banks to remain financially sound and profitable. Interest on advances (loans) forms an important and vital source of income for banks, which allows the banks to sustain and remain financially sound and profitable,” the RBI affidavit added.

Meanwhile, the SC today sought the Finance Ministry's reply on waiver of interest on loans during the moratorium period after RBI opposed it.

The top court said there are two aspects under consideration in this matter - no interest payment on loans during the moratorium period and no interest to be charged on interest.

A bench of Justices Ashok Bhushan, Sanjay Kishan Kaul and MR Shah said that these are challenging times and it is a serious issue as on one hand moratorium is granted and on other hand interest is charged on loans.